Mondelez To Buy License To Make, Sell Cadbury Biscuits

Mondelez International, Inc. (NASDAQ:MDLZ) recently announced that it has entered into an agreement to acquire the license to manufacture and sell Cadbury biscuits globally from Burton’s Biscuit Company.

The companies have though agreed that under a co-manufacturing agreement, the biscuits will continue to be manufactured in Burton’s factories. The financial terms of the transaction remain undisclosed.

Cadbury was acquired by Mondelez (then Kraft Foods (NASDAQ:KHC), Inc.) in 2010 for about $19 billion to expand its presence in emerging markets

In the last reported quarter (second quarter of 2016), Mondelez saw strong biscuit sales in the U.S., Germany and the UK which mitigated weakness in China and Brazil. Biscuits market share was challenged in some key markets like U.S. and Brazil in the quarter.

Mondelez is a worldwide leader in biscuits, chocolate and candy and also holds a dominant position in gum. Its billion-dollar -- which generate revenues in excess of $1 billion -- biscuit brands include Nabisco, Oreo and LU.

Last month, Mondelez announced mixed second quarter results. Mondelez beat second quarter estimates for earnings, but missed the same for sales. Adjusted earnings of 44 cents per share grew 4.5% as cost savings and higher non-operating gains offset dilution from the coffee divesture and soft sales. Organic revenues rose 1.5%.

While emerging markets growth remained weak, sales trends somewhat slowed down in North America due to aggressive trade spending by some competitors. Mondelez modestly reduced its 2016 organic revenue growth guidance due to increasing global category challenges.

Mondelez’s key category — snacks — has slowed down due to soft global retail and consumer demand. Mondelez, like many other U.S. food producers like Kellogg Company (NYSE:K) , General Mills, Inc, (NYSE:GIS) , The Kraft Heinz Company (NYSE:K) , has struggled due to shifting consumer’s preference toward natural and organic ingredients over packaged and processed food.